five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. all right. in case you missed, bill gunderson, give us a number that meets all three of your criteria. that's a name he threw out. ocwen financial, never heard of them. they meet his momentum and valuation criteria, so if you missed it, there it is, don't say we don't deliver. >> sounds welsh. >> anyway, breakfast lovers rejoice because today is national pancake day. ihop restaurants around the country are offering customers free buttermilk pancakes and are asking customers to consider donating to charity in exchange for the short stacks.

dineequity, the parent company of ihop, having a nice run over the last year, up 42%. imagine how many pancakes are fueling that raly. >> yes. everybody leave a little bit of money there. i think that's a good cause. >> yeah. >> the market is powering higher. the dow jones industrial average continues to move up, maybe 14,000 coming again soon, and by the way, need to note, something bill gunderson said has a lot in common with mandy. both apple under him and apparently your college transcript show the rare f-plus. >> shhhh. just between us. thanks for watching "street signs," everybody. "closing bell" is next. hi, everybody. we enter the final stretch. welcome to the "closing bell." i'm maria bartiromo at the new york stock exchange. stocks doing another about-face, and we are at 14 hub. >> i just said on twittery little while ago. yes, i'm tweeting again, oh, dear god. monday is officially forgotten now with today's rally. >> right, right. >> for those of you who thought a selloff was the start of a

much talked about pullback, not so fast. big gains out of the gate. the dow once again flirting with a close of 14,000. we're above it right now. we'll see what's behind the volatility and if the next leg will be higher or lower. >> also on today's program, is this historic rally being fueled by smart money or as some of saying the dumb money? that's pushing the stocks higher. we'll discuss and who in fact is buying the smart money. >> i like calling it smart money but got come up with something else, not dumb money. >> crucial earnings after the bell. those results could help tomorrow's direction. we have that man right there, disney ceo bob iger joining us moments after the report is released. >> and the president is pushing congress to come up with new tax revenues and short-term spending cuts to avoid the massive cuts that will otherwise kick in automatically on march 1. how ways and means chairman david camp is here to respond.

>> looking forward to his comments. has a lot to say. here's where we stand right now. the dow, a mirror image of yesterday. a selloff in the open yesterday in the morning and then it went sideways, and today we've done that the opposite. a rally on the open this morning, now up 123 points and just off the highs at 14,004.08. this would be the third could be sective 100-point move for the dow, and the we're only three days into the month of february. the nasdaq is up 45 points wiping out yesterday's losses. now at 3176. that is the high of the session right there, and the s&p 500 index is showing a gain of about 17, now 18.25 points, just off its high at 1315. in today's closing bell exchange, we're joined by todd schoenberger, marky willman from jmp securities and linds freftn financial and our own rick santelli. todd, you've got to be loving this real right now. >> i'm loving it right now, bill, and i don't see this thing stopping any time soon.

it seems to me equities are the only place to be. yields are low. they are going to remain low, and it's clear that the headline risk isn't there, a la the fiscal cliff mess. right now equities are there, and it's going to continue, at least -- at least through this earnings period, if not longer. >> so what turns it around, mark lehman? what do you think? are there things that you're watching for the potential for a reversal and red flags there? >> i think the red flags would come from a sentiment that drastically shifted meaning that washington was not cooperating, that republicans and democrats were not getting along, and given what the president said today, given how investors shrugged off yesterday, i just don't see it. i met with a lot of investors over the last couple of weeks. cash flows are coming in to equity mutual funds. that's a change from the last few years. you talk about the unenlightened money. the unenlightened money is the one no in the market and people are playing catchup, and you see that today. >> lindsey, you feel this market is being very picky, only focusing on the good economic data and they are ignoring the

bad. >> that's right. the market is very at odds with what we're seeing in the economy, cherry picking the data to really support anything behind this, the recovery is here mentality. case in point is the market's reaction to a better than expected headlines report in durable goods and shrugging off negative fourth quarter gdp. the market is anticipatining ma of the one-off factors that retarded growth, hurricane sandy, impasse in washington, won't have an impact in the economy beyond the first quarter, let alone the first half. >> so do fundamentals matter then, lindsey? >> i think right now we're very much at woods what we're seeing with the one-off factors. remember, recovery is never easy and never a straight line and all the data won't point in one direction so all the while the market is focusing on the underlining trend that we see in consumption which is very confusing and at odds with what we're seeing in terms of income and job growth. right now the consumer feeling wealthier because of declines in prices at the pump and a

recovery in the housing market. >> rick santelli, how much of today's rally in u.s. equities is because of a rally in the euro, a strong european rally after strong data this morning? >> when i came in lately, if the nikkei is down, this means european bur european bourses are up. i see the improvement. right around 135.80 and many thought we'd slip under 135. the euro correction, i can't tell whether it's over, but many traders don't think we'll see 137.5 in a while. treasuries once again, slightly above 2%, been there, done that, but it's still important because we haven't seen a huge rally pushing yields down for 2013. nothing big with big depth. and lumber, lumber today, as you see an intraday chart, was up, i think it's 2.4% which ends up being $10, maximum allowed. here's what's fascinating. open that chart up year-to-date,

haven't taken out some recent highs, but if you pull back to a chart going to '05, could you clearly see we're getting to a zone we haven't seen since april of '05, and it's a testament that we have moved past the inflexion point. we're not robbing gdp in housing and slowly adding to it. the big question is how much. >> lindsey, that is a fundamental right there. that points to strength in the housing market down the road if they are buying up lumber right now. construction can't be far behind. >> sure. >> is that something you can ignore at this point? >> no, certainly not, and we are taking steps in the right direction to getting a more stable housing market. remember, we're coming off of a very low level, so it's going to take years before we're back to a more sustainable, more robust housing market, so while we are taking steps in the right direction, it's not going to be a short-term fix, and a lot of that construction is going along the east coast as we see rebuilding after hurricane sandy. >> what's -- >> and that hasn't even shown in the real estate stocks either, guys. if you look at the dow jones

real estate index. it's flat today and hasn't performed well at all so you would expect that housinging is just not there right now. >> what's most vulnerable to you right here, todd? what looks like it's not participating in the rally, and, in fact, wants to go down despite the broader momentum on the upside? >> well, real estate is the wild card. so is gold right now. i mean, i don't see it. look at the dow jones precious metals index. it's up what, maybe 25 basis points today. been relatively flat so not participating in the rally. look at the large-cap stocks and small-cap stocks. any asset class that you really want and you can also look at things like, we talk about consumer discretionary. look at the travel and leizure index. carnival cruise lines a big winner right now because people are taking vacationsing probably because it's so cold as well. >> mark lehman, watching to see if we can close above 14,000 on the dow here. you feel that's going to be a psychological barrier for the market, yes? >> it's been talked about great lengths in the media and having

that tough day yesterday and how quickly we bounced back. you mentioned gold earlier. it's a fascinating trade because gold is the fear trade. you look at what california, my great state did, over the last year closing their budget deficit overnight really with tax -- big tax rise that governor brown got through. gold is the fear trade and look how quickly that has abated here in california. that potentially is a mantra for the country, and if people think the fear trade is gone. where are they going to go, equities and 14,000 may just be the beginning. that's what i see. >> that's right. >> the gold rush is over in california, again. >> thanks, everybody. we'll see you soon. appreciate your time. we are watching dow 14,000 going into the close tonight. josh lipton is right now looking at the stocks leading the comeback. over to you, josh. >> maria, big gains today following yesterday's selloff and lots of new highs starting with the dow transports, hitting a new all-time high year-to-date. the transports have outpaced the dow industrials by over 4%. all driving the rally, information technology stocks,

computer sciences. the biggest gainer in the sector and on the s&p 500 today, up around 10%, a turnaround story, the i.t. company posting a third quarter profit on improving revenues and asset sales. video game-maker electronic arts also in the green today after launching the latest version of its popular game dead space. the video game franchise now has 1.4 million fans on facebook. the stock today up nearly 6%. estee lauder, the skin care company, posted better than expected earnings and reaffirmed its full year outlook for sales growth helped by strength in the u.s. and china. the ceo saying the affluent customer is spending freely. the stock today posting an all-time high, up about 6%. also posting all-time high today, consumer stocks like procter & gamble, kimberly clark and johnson & johnson. we'll end here with kelloggs. reporting better than expected earnings and raising its

full-year forecast. the stock right now, up only about 1% but also an all-time high going back to 1968. maria, back to you. >> all right, josh, thanks so much. >> we've got the financials, the consumer stocks and energy stocks, pharma, food, a healthy rally but can it last going into the final hour in the dow right at 14,000, up 123 points. >> well, last month retail investors put a record 39.3 billion into mutual funds and etfs. here's the bad news. the previous record inflows came at the height of the technology bubble. what does that mean in terms of heading for the exits? is it different this time? we're going to check out the retail behavior. >> also. washington already has enough trouble getting things down these days. now the s.e.c. is literally being handcuffed, really, by what it can and cannot do because of conflicts of interest. i'm picturing the entire s.e.c., why that's undermining enforcement and maybe going to cost you some money next. we'll look at that very

important. >> and will dow component dissly fuel the legs of this rally? that news after the bell and ceo bob iger is here live and breaking down the numbers live in a first on cnbc interview. that's today live at 4:20 p.m. eastern.

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conflicts of interest are already handcuffing s.e.c. commissioners from ruling on many cases, and president obama's nominee to run that agency now, mary jo white, could make it even harder for things to get done if she's approved by the senate. eamon javers is in washington to explain. eamon? >> reporter: hi, bill, the "wall street journal" reported today that a raft of conflict of interests at the s.e.c. could make it difficult for the wall street watchdog to weigh in on high-profile matters, issues that some the s.e.c. have worked on for past employers. for example, "the journal" said president obama's s.e.c. chair nominee mary jo white would not be able to vote on any case involving jpmorgan for two years after taking the job because jpmorgan was a client at a previous law firm. and daniel gallagher would have a conflict of interest on jpmorgan cases, too. he came from a law firm that helped jpmorgan investigate the london whale trading fiasco. such vacancies could give the

s.e.c. bare number of minimum commissioners to field a quorum on certain cases which could potentially weaken the commission. s.e.c. declined to comment to the newspaper on behalf of white who is not yet a commission official. back to you. >> thanks so much, eamon. reaction now with attorney andrew consultman who says this is a major problem, while a former s.e.c. official says the benefits of having the right people far outweigh the cost of some conflicts of interest. both join us right now for a discussion. good to have you on the program. robert, i think you make a good point. you want people with the experience and sort of know-how in some of these complicated cases to be working there, but how do you offset the potential for conflict of interest? >> well, that's right. here we have a clear case where there may be conflicts, but the s.e.c. has strong rules in place that prohibit voting on conflicts where the person directly worked on a case, but i think what's getting lost in this debate is that the s.e.c. is a bigger program than just enforcement. they regulate the securities markets. they regulate public companies, etfs, all sorts of market

products, so to have some conflicts i think is going to be expected, but in order to have people that are familiar with the broader issues that the s.e.c. addresses, we really need to have that sort of experienced voice at the s.e.c. while still dealing appropriately with conflicts. >> andrew, you disagree? why? >> i do, because i think when you have people with conflicts like mary jo white is going to have, i think what you've done is in effect guaranteed institutional paralysis and institutional gridlock. you know, you look at somebody like mary jo white and a crucial enforcement action may be taken against jpmorgan for the london whale debacle, and if you can't have the s.e.c. chairman weighing in and deciding whether that should or shouldn't take place, i think that's a big, big problem. >> what about that, robert? >> well, the s.e.c. enforcement program is much bigger than just the chairwoman or any commissioner. there's a staff of people at the s.e.c. that work on these cases and that develop them over months and months, so whether or not the chairwoman is conflicted in one particular case is really

not going to be a determinative issue. there's really been noest that any enforcement activity has been slowed down as a result of conflicts they may have had with past employers and the staff and senior people are really capable of moving the cases forward with or without the votes of any one commissioner. >> bill, i just -- i think the problem with that is in effect we are approving an s.e.c. chairman or in this case chairwoman because we want her to partially make decisions on what goes forward. i understand leaving decisions with the staff, but ultimately it comes down on the shoulders of the commissioners, and if they are too conflicted with too many cases, that's a big, big problem. >> you know, andrew, really can't have it both ways, right? one of the big issues that we saw when the financial collapse occurred was the fact that nobody knew anything about some of these complex derivative instruments because they didn't have the experience, they didn't have the know-how so you can't have a commission their actually has the experience and then say, well, that's too much experience

and it's a conflict of interest. how do you fix the interest? >> clearly you do need people with experience, but i think the big problem is what we've seen now is we've seen commissioners who are former s.e.c. defense lawyers, and that's where the problem starts. you know, if you have someone like mary jo white or harvey pitt who used to defend merrill lynch and you're not expecting them to make decisions that impact their ex-client, clearly they can't do that. you can strike a balance and have somebody with experience. for example, a -- >> they should be able to do it, shouldn't they? they are fighting for the law so they should be able to do it and should be able to recognize right from wrong. just because they defended a firm on wall street doesn't mean that they are lying? >> no, maria, but very clearly if your ex-client has paid you hundreds of thousands of dollars to defend it in the past, i think it's going to be really problematic for that person to be objective on the decision. >> that's a good point. >> certainly we don't question the integrity of a mary jo

white. >> no way. >> but you have to say that the optics are not great if you have a person who is chairing the agency who has those kinds of conflicts, especially as andrew points out if it comes to a very high-profile case that the s.e.c. is trying to enforce on. >> well, i think the problem with the analysis is really just focusing on one small aspect of mary jo white eats career. remember, before she was a defense lawyer at a wall street law fir, she had a very distinguished career as a federal prosecutor right here in new york city where she took on some major cases against wall street interests. >> that's right. >> so i think president obama's pick of mary jo white really was based on her proven track record as a senior federal prosecutor and her ability to get tough settlements from wall street and weighing that against her potential conflicts from representing certain wall street firms. i think it's a small price to pay, and the s.e.c. does have policies and procedures in place to deal with conflicts, but it shouldn't disqualify a person of mary jo white's caliber from serving as a chairwoman.

>> that's a great point. >> andrew? >> ihinkou hit the nail on the head. it is sort of an optics issue, and the s.e.c. is trying to get a new reputation, after missing bernie madoff and allen stanford, they are trying to create a new s.e.c., and when you have the chairperson not being able to take part in crucial, crucial enforcement actions, as a minimum the optics are horrific. >> well, we will see what happens. thank you, gentleman, for your thoughts on this. >> thank you, bill. >> thanks so much, guys. >> 20 minutes before the closing bell sounds for the day. market up in the triple digits, up 130 point in the dow jones industrial average, sitting comfortably back above 14,000. >> highlighted lumber and home prices soared according to a new report in december, but many of the big home builders have been downgraded today ironically. why the disconnect? we'll talk about that next. >> something more than a government's lawsuit against standard & poor's for blowing it on the mortgage market? >> it's just political payback for s&p's action to downgrade

u.s. debt. do clients believe that this was somehow politically motivated? >> you'll have to stick around to hear the answer to that question when we come back in a moment. great, everybody made it. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard.

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welcome back. breaking news right now. let's get to the david fab we are that. >> thanks, maria. tracking a potential deal in the media sector, not in this country, but an important one in europe, and can i tell you now that the boards of both liberty global, of course, the european cable company controlled by john

malone, and the board as well of virgin media, a broadband company, the second largest provider of those types of services in the uk, have agreed to a deal under which liberty global will acquire virgin media. now, it's a cash-and-stock deal, but at this point i cannot tell you precisely what the ratio is on the stock portion. therefore, i cannot tell you precisely the stock price other than to say it is below $50 a share. virgin media stock has been trading right around the $45 level much of today, up about 17% or 18% after we learned of the talks taking place between the two companies when we in fact confirmed. as i reported earlier, these talks have been on again and off again and have heated up reesantly and now we have a deal with both boards having approved that deal just moments ago, my sourced tell me. but, again, more details on price as we get them and when we get them. maria, back to you. >> all right, david. thanks so much. >> in the meantime, the s&p home builder index is up about 40% in

just the last year, and that run-up has prompted at least one wall street firm to downgrade several of the home building stocks. diana olick has details in today's reality check. diana in. >> that's right, bill. barclays is calling the home builders, quote, stretched and downgrading several of them as we begin to see some profit-taking. first, they are downgrading their own view from positive to neutral as they say housing suppliers and remodlers will do well, but stock valuations of the home builders went too far, too fast. after falling dramatically from a peak in 2005 the stocks of the home builders saw liftoff well before the housing market had really hit bottom, spiking in the second half of 2011. we're still around 35% below the peak right now though. the stock is up 240% from their trough in march of 2009. some are calling it a momentum play, but a lot of growth is

baked into the home builders for 2013 with housing starts and sales up 20% is the prediction. now, barclays concerns are that the possibility of new home prices coming down as a gradual improvement in credit availability brings more entry level buyers into the market. they would be looking for lower prices. they say the current price gap between new homes and existing homes, is quote, unsustainable as it corrects new home prices which could start coming down, even as prices in the broader existing home market are surging. back to you guys. >> thanks so much. does all of this mean the ride is over for the home builders? take a look at that in talking numbers. on the technical side of the story ennis tanner and on the fundamentals jeff kilberg with kkm financial and a cnbc contributor. jeff, let's kick it off with you. let's do the fundamentals. want to buy the home builders here on basic fundamentals? >> maria, not right here, but i do like the fundamentals here, seeing a sensational move in the

last year. no doubt it's a little frothy. three reasons i want to buy on a pullback here. first and foremost, seeing a lot of institutional money coming into the situation, jpmorgan, blackstone, coming in and buying inventory. secondly, waiting to see the banks on the net interest margin and once they get the nim in place, they will incentivize the loan. we want to be buyers 2002 in 2013 we'll see continued growth in the home building space. >> what do you say about the charts, how does the home building inteams, the eft, how does that look to you in terms of the technical aspect? >> looks very extended and refreshing to see barclays come out and actually sell when the stock prices are high. if you look at the 18-month chart from the october 2011 low, you can see the stocks have been -- the efts have been in a strong uptrend. more than doubled since then, been in a tight trend channel and i think you're going to see

selling pressure ensue. the level i think is where support lies where i'd be more of a buyer here, but i think you pear back your gains. >> sounds like both of you believe the fundamental story but think it's extended. the valuations bother you. >> they are certainly very stretched. go air head. >> if you look at the home builders specifically, home builders valuation relative to 2002 and 2006, let me put my fundamental cap on here for a second, much higher now than they were back then, even at a similar earnings price level. against that i think you look at auto names like ford that rin directly exposed in the housing market but not nearly as expensive. >> i think one other thing, inventory, maria. seeing that getting gobbled you. that will play into the hands of the new home builders. one now, one thing i've lived by life by is top to be the hammer, not the nail and if you're been short this stock, you've literally been crushed in the floor and it's proper and prudent to wait for the

pullback. ennis says 26. i say 24. we'll be watching. >> thanks, guys. interesting that you fundamentally and technically agree that this group is overbought and needs to come in. >> would rather be the screw driver, it's less of a pounding thing going on, you know what i mean? >> home builders. >> he said he'd want to be the hammer or nail. work with me here. holding above 14,000 on the dow. here we've got 30 minutes left in the trading session. >> apple's latest ipad hitting store shelves and lock at the lines. check out these shots. >> yeah, exactly. >> where are the line? >> as we widen out the shot. last time apple had a new product and no one lined up. why that has them very worried this stock may not recover so soon. back in a minute. >> and president obama proposing to delay massive acro across-the-board spending cuts, but did he offer any specifics? reaction come up later on the "closing bell." tdd#: 1-800-345-2550 when i'm trading, i'm totally focused.

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let's see. tech stocks led the market lower yesterday, and they are leading the comeback today.

se seema mody is on the nasdaq roller coaster for us today. seema? >> reporter: broad-based rally in tech for today, but let's put this all into perspective. tech as a sector is still the worst performing sector this year, and what's even more interesting is that earnings this quarter have been relatively strong. 81% of the tech stocks that reported earnings have beat street estimates while the entire s&p 500 has a 68% beat rate thus far. it's not earnings, what is it? isa capital says there's a perception that tech is deflationary and has matured as an industry. michael pento of portfolio strategies says it's the negative sentiment driven by apple, apple and its sharp fall has been casting a dark shadow over tech making investors more hesitant to invest in this shape. seeing shares slightly higher, that's apple but keep in mind shares of apple roughly down still 14% this year. maria. >> thanks so much, seema. we're sitting right at 14,000,

threatening to go up below it. we're at 14,001 so it can go any way here. >> sweaty palms. >> sweaty palms. >> it's what i hear on friday. right down to the wire on friday. >> even at 4:00, it just was settling out. >> yeah. meanwhile, apple out with the latest version of the ipad today with all the same features as the last version, except at 128 gigabytes this one has double the storage capacity. >> however, unlike other ipads this, fourth generation is not getting much buzz. on the left side of the screen there, this is what the lines looks like in 2010 when the first ipad came out and on the right side, same apple store today. so is this a sign that the stock won't be coming back any time soon. the lines lesser. nicholas carlson and colleen taylor says don't judge a stock by the lines outside the store. thanks for joining us.

colleen, you're excited about the new ipad even though it's pricey and getting -- it's not getting as much buzz. why so optimist snick. >> you know, maria, the real thing with this new ipad, the storage is the game changer because it makes it finally an enterprise device. you know when businesses order i.t. equipment for their companies and for their sales people, they don't like up at the apple store, they order them. they order them from the company in the quantities of dozens of hundreds and potentially thousands. this is an enterprise device. what you can do with 128 gigabytes of memory and storage is you can do cad files and dr. dow blueprints and x-rays and do pilot flight plans. can you do sales presentations with hd video that's going to look beautiful on this retina screen. that's what apple is really banking on here with this device. they want to sell to businesses. >> i mean, nicholas, you say it's a nice product, but it's not going to make that much difference to apple. why not, and where are the lines this time around? are the introductions too close

together today? >> apple is a healthy company that employees like to work for and consumers like it and everything like this. a new ipad, a small upgrade really, over an existing product. this ipad isn't going to be the thing that restores margin growth and really gets profits accelerating again, not just growing but accelerating. it's going to take something else. going to take a big new product, and, you know, if you look at apple, their current management team hasn't been one that's been responsible for a big new product launch yet. haven't seen one out of the tim cook regime, and so it's hard to say that this new, you know -- this magical upgrade is really going to fix things for apple. i certainly don't think it's going to. >> should we be having such frequent updates? you know, people just bought it, the last one, and now there's a new upgrade and the same with the phones. is this too much, too many products? >> this is a major update.

it doesn't look different from the outside, but as we know with apple it's not just a hardware story, it's a software story and digital media story. under 28 gigabytes of media storage, that allows you to play hd veds and download a lot more apps and that's great for the app store and itunes. this is also a huge signal to developers here in silicon valley, start making enterprise apps for the ipad and that could be a big game-changer for the income statement for apple in terms of the money that they make. remember, enterprise apps -- >> colleen. >> go ahead. >> here's the big challenges for apple. the pentagon chael challenge for a s&l that it's a really great wonderful product that's changed the world but ipad, it growth is not enough to make up for the slowing saturation of the smartphone market that -- that is happening because the iphone is being adopted and the rich people already have these things. you know, the ipad is a great product, but it's been so great, it hasn't been able to sort of do what the iphone has done. the iphone is a once in a

lifetime product that was wonderful for apple's profit margins and we're just not going to see the likes of it again any time soon. >> not to pile on, colleen. you have to admit buzz is not there for apple and when you look at the stock price, it's down sharply from those highs last september when ironically they had just introduced the new iphone, so, you know -- it's a nice ipad, but where's the buzz for apple these days, colleen? >> listen, i agree, apple need to do a lot more to get this stock back, but the buzz isn't there because this is an enterprise story. this is a business story. businesses, enterprises, people buying big quantities for their sales forces, they don't need a lot of flashy buzz. they need a good product that think people can use and 128 gigabyte storage i think is going to go a long ways towards doing that. >> all right. thank you both for your thoughts today. appreciate it very much on apple. >> 40 minutes -- i'm sorry, 20 minutes before the closing bell sounds. we've dropped below 14,000 at

this point, 13,999. going back and forth. a real close gain with a gain on the session of 120 point. >> the bulls have fourth and goal and see if they can make it over. >> they were killing it, the ravens and then the power outage. don't get me started. >> we don't want a power outage here. the department of justice is suing standard & poor's, as you know, for allegedly defrauding investors over its rating of mortgages before the crisis. will the go after other agencies or just the one that downgraded the united states. >> and dow component disney reporting earnings. we'll speak with ceo bob iger minutes after the release. don't miss that. pack in a moment. protect your family... and launch your dreams. at legalzoom.com we put the law on your side.

welcome back. shares of standard & poor's parent mcgraw hill down sharply today after the justice department formally accused the ratings agency of defrauding investors. the stock also pounded yesterday as word came down this would be happening, and today we did get the official news. david faber spoke to s&p lawyer exclusively, but we start with scott cohn with the details of the suit. over to you, scott. >> reporter: this is a civil lawsuit, no one going to jail even though attorney general eric holder says it involves fraud at the very heart of the financial crisis.

the feds want $5 billion from standard & poor's and its parent mcgraw hill because authorities say s&p issued materially false ratings on the mortgage-backed securities that wall street sold around the world during the housing bubble. the complaint says the agency violated its own standards rating the securities investment grade so it could gain market share. the government says that is fraud under federal law that was passed over the savings and loan scandal in the '80s. s&p analysts, like the wall street analysts of a decade ago, privately trashing deals that they were publicly claiming were solid. two analysts instant messaging, by the way, that deal is ridiculous. i know. model definitely does not capture half the risk. we shouldn't be rating. >> we rate every deal. >> that exchange first made public in a congressional hearing back in 2008 and now it could be evidence in court. what does s&p have to say about this and motivation behind this

lawsuit? david faber has been talking about the s&p attorney, a first amendment laurene though that will not be s&p's defense? >> no, scott, interestingly. something we've talk about off camera. floyd abrams known as a first amendment attorney but he's been in fact representing s&p for over five years. let's not forget that the company has fended off any number of lawsuits in the past, in part using the first amendment defense and he went on to say during our own interview they won't put that up as a defense and say can the government really prove that we knowingly, the analysts at s&p, knew one thing and said another? well, he believes that's obviously going to be very, very hard, in fact, to do that, if and when we ever get to a trial which would be years down the road. i did ask abrams as well whether he thinks this is at all in part motivated by the government seeking revenge for the s&p's downgrade for u.s. debt in the summer of 2011.

>> is it true that after the downgrade the intensity of this investigation significantly increased? yeah, i'm sure the government would say it had nothing to do with it. we don't know why. >> but it did increase after the downgrade? >> as he was correctly assuming, eric holder, the attorney general, says it has nothing to do with that. still, it does beg the larger question, if you're going after s&p, why wouldn't you gone after moody's as well, the other large ratings agency that engaged in so many of these practices that we're well aware of given all the e-mails unearthed and that which scott referred to. here's what holder had to say on the overall question of whether this was political payback. >> they did what they did assessing what the credit worthiness was of this nation. we looked at the facts, the law and the investigation that these great prosecutors and civil

lawyers put together and made a determination that the filing of these lawsuits is appropriated, but they are not in any way connected. >> the settlement talks as we've previously reported, the government saying we want at least ten plus, at least $1 billion. mcgraw hill, the parent of s&p, had come back perhaps with $100 million offer. they also want an admission of guilt. hence, they have brought those charges, but it's going to be quite some time until we see them, if we ever do in a court of law. >> david, what's the answer as to why moody's is not being investigated as well. i don't understand. what's the answer to that? >> i don't have an answer for you. holder and his associates were asked that question a number of times during the q&a at the press conference. they said this is about s&p any number of times, but knowing what i do from my own reporting, having also read so many of the investigations that have taken place, it is a fair question to ask, but i can tell you, according to my sources, there is not at this point an expectation on the part of moody's that it's the subject of

any potential lawsuit down the road even. >> wow. >> we'll see if that changes. >> yeah. >> but certainly an interesting question. >> it is, especially since s&p downgraded the u.s. rating. >> right. >> i understand even putting the two together because there's not any other investigations. >> the market has voted. sent moody'own like they did s&p anyways. >> they have indeed. still an expectation that they could suffer or maybe the businesses of both companies will simply suffer as a result of this. >> thanks, david. >> see you later, david. thank you very much. >> headed towards the close and still flirting with that dow 14,000 level, down to 13,994 right now. up 114 points. a collective holding. breath down on wall street here. >> still this market getting closer and closer to record highs. >> barclay's larry canter says stocks are cheap even with the records. >> and a retail investor jumping back into the market and our jeff cox says that's exactly why smart investors should run for the exits. back in a moment.

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all right. let's send it over to josh lipton for a quick market flash on a story david faber told us about earlier. >> we're watching virgin media rocketing higher, up some 18%.

david faber report that had liberty global acquiring virgin media in a cash and stock deal. david reporting that the boards have approved that deal. we're still waiting for the pricing, and we'll get you that as soon as it crosses. bill, back to you. >> thanks, josh, very much. >> dow jones industrial average now closing in on that 14,000 level once again at 13,990. >> yeah. with three straight market days now of see-saw triple-digit moves by the dow, is roll tilt back? will it continue? joining us with their thoughts, sam stoval and larry canter from barclays. what about the volatility? one triple-digit move in the dow in january and three so far in february. >> i think we're just getting back to normalnormal. in 2012 we had three days that the s&p fell by more than 100 point and the average since 2,000 was 15 so we had one-fifth the volatility last year as we've normally had.

>> what do you think, larry? obviously there's a lot of momentum in this market, even despite the decline we saw yesterday. does this continue? >> well, i do? i wouldn't be surprised to see a correction given how strong january was, but i think one of the things that's happening here is the kind of re-rating of stocks versus bonds. had two big negative tail risks hanging over the stocks. dissolution of the euro. i think it was a bit of a risk premium in treasuries that's going away and people are starting to gravitate towards stocks which look a hell of a lot cheaper and more attractive than bonds do. >> we keep hearing that, and had todd shoenberger on a little whooil while ago and i respect his opinion and he's among those saying what else are you going to invest in? is that a reason to buy stocks because there's nothing else to invest in? >> one, stocks by themselves aren't a screaming buy but relative to yields you get on

fixed income they look very cheap and remember growth has picked up and even in europe it's looking better and i think that's helping, and the second thing is monetary support which is stepping up, the feds starting at the question 3 and we just saw what happened at the bank of japan where they will get a new governor in there who will step on the gas further. >> the low rate environment is a major driver. >> absolutely. >> how do fundamentals look? >> earnings much better than expected. 2.5 percentage points before where the expectation was at the beginning of the period. now s&p capital ik consensus are at 6%. the only problem is it basically seems to have been borrowing from the first quarter of 2003. now we're only looking at 1.4% growth but had been expecting close to 4% growth. >> how about revenue. >> pretty much steady at 3.5% growth so better than the one-half of 1% we got last quarter but still not seeing the driving ref now that i would

like to see. >> i know we're splitting hairs and i can't afford to do that anyway, but the dow is up 100 points so we're at risk of not having the triple-digit move in the market. psychologically would that matter at all, at least for the short term? >> i think revels are like rusty doors, takes a couple of attempts before they finally swing open, and this is just one of those attempts. >> well said. >> larry. >> you're thinking five, ten years down the road. >> you're thinking a psychological boost for an hour or so. >> round numbers. >> see what happens. >> we'll see you on the countdown coming up here. when we get to that countdown we'll wrap up the day. >> minutes away from reporting their earnings, ceo bob iger standing by for an interview you'll see only here on cnbc. >> earnings estimates from chipotle and zynga. still much more to come on cnbc. we are first in business worldwide. all stations come over to mission a for a final go.

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the fear index, is at that five-year low. is that complacency? we'll ask terry dolan about that in a movement meantime, have you some earnings coming up. disney is coming up in a few minutes. as soon as disney reports earnings, we'll talk about the quarter. 76 cents a share is what people are expecting and 11 billion in revenue. bob iger will join us at the top of the hour. i'm just wondering, bill, if in fact 14,000 has become a bit of a barrier for this market at this point. seems like every time we inch closer toward it we're seeing a bit of a pullback. what do you think, larry? >> with technical levels, it takes a while and once you go through you go up a little more. >> as i was saying before, this has been a spectacular rise in january, and i'm waiting for at least some correction. yesterday thought it was the start of it. >> look the way we bounced back. >> i kind of agree with larry. thought yesterday would be the start of a decent correction. if you take a look from 12,8 to 14,000, looking at a 1,200 point.